Answer and Explanation:
The journal entries are given below:
1. Notes receivable A/c Dr $450,000
To Cash A/c $450,000
(To record the notes receivable acceptance)
2. Interest receivable A/c Dr $40,500
To Interest revenue $40,500
(to record the interest is collected)
Interest = Principal × rate of interest × number of months ÷ (total number of months in a year)
= $450,000 × 12% × (9 months ÷ 12 months)
= $40,500
The 9 months is calculated from April 1 to December 31
3. Cash A/c Dr $504,000
To Notes receivable A/c $450,000
To Interest receivable A/c $40,500
To Interest revenue A/c $13,500
(To record the cash collected)
Interest revenue = Principal × rate of interest × number of months ÷ (total number of months in a year)
= $450,000 × 12% × (3 months ÷ 12 months)
= $13,500
The 3 months is calculated from December 31 to April 1
